Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, February 5, 1991 TAG: 9102050080
SECTION: BUSINESS PAGE: B-4 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
Labor costs continued to rise as the tumbling economy forced businesses to trim working hours drastically in the final months of 1990, the Labor Department report showed.
"What we have here is the worst of both possible worlds - the economy was sinking into recession at the same time labor costs were accelerating," said David Jones, an economist with Aubrey G. Lanston & Co.
Increased productivity, or getting more worker output per hour on the job, is considered vital to increasing the nation's standard of living without inflation.
But the latest showing, said Jones, indicates the United States is continuing to lose its competitive edge in international markets and threatens a long-term reduction in living standards "unless one of two things happens - either we sharply improve the quality of our labor force through education or sharply improve savings and investment in new plants and equipment."
"Our ability to produce more goods and services does determine the pie that's available to us," said Allen Sinai, chief economist at the Boston Co. "That pie grew very slowly in 1990 and is going to shrink in 1991."
During the final three months of 1990, the report said, the nation's businesses trimmed the working hours of their employees at an annual rate of 2.7 percent - the largest falloff since the depths of the 1981-82 recession.
It was the second quarterly decline in the number of hours worked, a normal consequence of recession as businesses trim payrolls.
While productivity fell for all of 1990, it was about unchanged for the fourth quarter, growing at a small annual rate of 0.1 percent.
In the manufacturing sector, productivity declined at an annual rate of 2.4 percent in the October-December period - the largest drop since 1981. At the same time, factories trimmed their hours by 6.4 percent at the tail end of 1990.
The decline in manufacturing hours was the steepest since the final quarter of 1982, when hours fell 8.6 percent, the government said.
For all of 1990, manufacturing productivity increased 3 percent and hours worked fell 2.1 percent, the report said.
Meanwhile, unit labor costs, a key gauge of future price inflation, rose 4.3 percent for the year, well above the 3.9 percent increase of 1989. Hourly labor costs rose 3.5 percent for the year, also above the 3.2 percent increase of 1989.
However, workers saw their hourly compensation decrease in 1990, once inflation was taken into account. Real compensation per hour dropped 1.8 percent last year, following a 1.5 percent decline in real compensation in 1989, the Labor Department said.
Before productivity began sliding in 1989, it had averaged 1.6 percent growth a year in the years following the end of the 1982 recession.
That was a better performance than the 1.2 percent average in the 1970s but far worse than the 2.5 percent annual gain posted in the two decades after World War II.
by CNB